Gold Slips to $1,920 – Geopolitical Tensions in Play
Gold is trading near Tuesday's low of $1,907.13 as investors await the Federal Reserve's interest rate decision (Fed). A continuous price
Gold is trading near Tuesday’s low of $1,907.13 as investors await the Federal Reserve’s interest rate decision (Fed). A continuous price action near the previous trading session’s low usually indicates the accumulation of significant offers and further weakness in the future. Although it is clear that Fed Chair Jerome Powell and his colleagues have no choice but to raise interest rates to curb soaring inflation, the catalyst that has investors interested is the extent to which the Fed will adopt a hawkish stance.
Meanwhile, 10-year US Treasury yields have hit a wall near 2.15 percent due to rising uncertainty about the Fed’s monetary policy. The US dollar index (DXY) has lagged behind yields and has struggled to stay above 99.00. Furthermore, positive cues from Asian markets have reduced the safe-haven appeal.
In addition to the Fed’s monetary policy announcement, US Retail Sales will be released on Wednesday. Compared to the previous print of 3.8 percent, a preliminary estimate of 0.4 percent indicates underperformance.
Gold XAU Live Chart
Russia-Ukraine squabbles continue concerning the key catalysts, but a halt in further deterioration appears to have alleviated recent fears. Global markets initially cheered signs of peace between Ukraine and Russia, as signaled by Ukraine President Volodymyr Zelenskyy’s adviser, before Russian President Vladimir Putin said Kyiv is not serious about finding a mutually acceptable solution.
Following that, Mykhailo Podoliyak, one of Ukraine’s representatives at the Russian-Ukrainian talks, mentions room for compromise. It’s worth noting that the UK imposed new sanctions on Russia, whereas Japan is considering removing Moscow from preferential trade status. Moscow barred Canadian Prime Minister Justin Trudeau from entering the country and sanctioned US President Joe Biden. Furthermore, China emerged as a new risk for markets, with a surge in local Covid numbers and lockdowns in multiple cities, the most recent of which was near the capital Beijing.
It’s worth noting that the US Producer Price Index (PPI) met expectations for a 10% increase year on year, whereas the NY Empire State Manufacturing Index showed the biggest drop since May 2020, adding to the market’s pre-Fed jitters. The recent easing of US inflation expectations from a record high, as indicated by the 10-year breakeven inflation rate according to St. Louis Federal Reserve (FRED) data, is also putting Fed hawks to the test.
Moving on, GOLD traders will be watching how the Fed combats inflation fears, which will pave the way for the short-term trend. China’s Covid headlines and Russia-Ukraine news will also be important, as the risk-off mood may cushion the metal against the hard-hitting if the Fed manages to praise the USD bulls.
Gold Daily Technical Outlook
Gold justifies a clear downside break of a six-week-old rising trend line and the 100-SMA, accompanied by bearish MACD signals, near a two-week low. Although oversold RSI conditions on the four-hour chart challenge gold bears, the 50 percent Fibonacci retracement (Fibo.) of January-March upside and the weekly resistance line, respectively, challenge any corrective pullback around $1,925 and $1,942.
Even if the price rises above $1,942, the 100-day simple moving average (SMA) and the previous support line, located near $1,948 and $1,954, respectively, will act as additional upside filters before giving control to gold bulls aiming for the $2,000 mark. Meanwhile, the monthly horizontal support near $1,877 is on the XAU/USD seller’s radar, a convergence of the 200-SMA. Good luck!
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